TCO vs. ROI: How to Evaluate the Benefits of Next-Generation Storage Technologies

With 32 different manufacturers now offering hyperconverged infrastructure (HCI) solutions, a datacenter free from the confines of conventional 3-tier architecture is becoming more of a reality.

However, while technologies like hyperconvergence are essentially “Uberizing” the datacenter, without the proper context it can be difficult to really understand how. Traditional purchase metrics such as cost per gigabyte and even acquisition cost are often irrelevant or misleading when evaluating the advantages of hyperconvergence.

Uber for the Datacenter

Suppose we were able to go back in time 30 years and approach a would-be taxi passenger standing in the rain fruitlessly trying to hail a cab.

We could tell her that in the future a company called Uber would use new technologies such as the Internet and smart phones and GPS to transform her transportation experience. Future rides would be simple, predictable and pleasant. However, lacking the context to understand these new technologies she would likely be skeptical that Uber could accomplish this.

Storage admins and technology buyers likely encounter this same type of challenge with their peers in IT, Purchasing and Finance who are used to looking at the datacenter through a 3-tier lens. Their first impulse is naturally to evaluate hyperconverged solutions in the same manner that they have long used for analyzing their conventional infrastructure purchases.

In reality, a Total Cost of Ownership (TCO) or Return on Investment (ROI) analysis, depending upon the use case, actually provides a far better framework for evaluating this kind of technology decision.

TCO vs. ROI

Many organizations use the terms “TCO” and “ROI” interchangeably, but they are very different. A TCO analysis is best for situations where you are considering migrating from an existing virtualized infrastructure either to an HCI solution, or to a new (or refreshed) 3-tier architecture vs. HCI solution.

On the other hand, use an ROI analysis when comparing remaining with a status quo environment (whether physical or virtual) vs. making the investment to migrate to HCI.

In terms of cost, an HCI configuration is not always the least expensive option when comparing against 3-tier infrastructure. But when incorporating projected upgrade costs over a 5-year period along with variables such as rack space, power, cooling, administrative costs, fiber channel cabling, etc., HCI will often blow away the competition.

Pro Tip: When competing vs. status quo, use ROI, not TCO. Generate a TCO analysis if comparing against another new solution or an ROI analysis if competing against a status quo environment.

Other Benefits of Financial Modeling

In addition to evaluating ROI and TCO, going through a financial modeling process can also help you better assess the differences between legacy and next-generation storage technologies. While the initial HCI investment may be for a specific use case or department, for the purposes of the financial analysis, it is always better to expand the scope.

If the request is for departmental VDI, for example, suggest looking at the potential economic savings from virtualizing the entire user base (or whatever percentage of that user base is reasonable to virtualize over the next five years).

Expanding the analysis scope enables you to better evaluate the proposed smaller initiative within the context of a big-picture scenario. This in turn enables both better decision-making and often more optimized deployment of resources when the initiative moves forward.

The Results

A cost/benefits analysis is most successful when numerical comparison between HCI and legacy 3-tier is no longer the primary evaluation criteria. The process of going through the analysis makes it clear that HCI will not only be far more beneficial for your organization overall, but that it will change your datacenter management experience in terms of simplicity, predictability, scalability and resiliency.